LIHTC Alert: The IRS Reminds Taxpayers of Requirements for Low Income Housing Tax Credits

January 2017

LIHTCAlert Puzzle

When developing a project that may potentially qualify for Low Income Housing Tax Credits (LIHTC), preferential treatment in allocation is an important consideration given the competitive nature of the process within states. LIHTCs, which offset income tax liabilities over a ten-year period for developers of qualified low-income housing, are limited to the amount allocated by the housing credit agencies of a given jurisdiction. The agency allocates tax credits through a competitive application process in accordance with the respective state’s qualified allocation plan. These plans will identify preference and selection criteria for the state’s allocation of credits. Each state has a predetermined amount of credits available for allocation. In determining which low-income projects within a state will be granted LIHTCs, the state’s credit agency must first consider projects which qualify for preferential treatment based on the nature and intent of such.

One of the preferences as outlined by federal law is for projects in “Qualified Census Tracts” (QCT) areas, which the development of such contributes to a “Concerted Community Revitalization Plan” (CRP). QCTs are areas deemed with predominantly low-income families for each state based on the census results for a given year, and are characterized either by the percentage of households below a certain income threshold or by poverty rate above a certain threshold. A list of these areas is published annually by the Department of Housing and Urban Development and is accessible online. Whether or not a given area is a deemed QCT should be the first consideration of low-income developers who are seeking LIHTC.

However, whether or not the development of a project contributes to a CRP is not as clearly defined but is still an important consideration when designing the structure of a low-income project. To classify as contributing to a concerted community revitalization plan seems to mean that, at a minimum, there must be a greater plan in place to aid the community outside the implied objectives of the development. As addressed in a recent Internal Revenue Bulletin, there is concern that the CRP requirement is not drawing as much attention by the agencies as it should during the credit allocation process. Consequently, the IRS and Treasure Department are currently requesting comments on the matter until February 10, 2017.

Click here for a complete list of LIHTC guidance and requirements in the state of NJ.

If you have any questions about this or any other related matter, please contact This email address is being protected from spambots. You need JavaScript enabled to view it. or This email address is being protected from spambots. You need JavaScript enabled to view it..

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